Foreclosure Settlement: Nationwide Crime Scene

The most shocking piece of news on Tuesday was a seemingly innocuous document [PDF]. A simple, sterile page; a printout of a spread sheet with numbers.

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But what the numbers represent is a massive nationwide crime scene.

That document is a summary of widespread and systemic error, malfeasance and reckless lack of care on the part of our nation’s big banks. What the numbers show are banks foreclosing on military service members who were entitled to relief, and banks foreclosing on homeowners who had been approved for a loan modification. The numbers even show banks foreclosing on homeowners who were not behind in their payments and not in default.

In fact, amazingly, there are at least 53 documented cases of homeowners who were totally current on their payments being successfully foreclosed on. Not just having foreclosure proceedings initiated against them, but actually having their homes taken away from them for no reason.

According to the findings posted just Tuesday by a federal bank regulator as part of a settlement agreement with a number of major banks, between 2009 and 2010, foreclosure proceedings that were wrongful or in some way contained bank error commenced against nearly four million homeowners.

About 30% of those homeowners had to battle potentially wrongful efforts to seize their homes, and more than 244,000 eventually lost their homes.

Tuesday, the Office of the Comptroller of the Currency, the regulator who compiled these statistics and came to its settlement with the banks, was supposed to be announcing good news—money to those who have been victimized by the banks practices.

But given the scale of the deception and error, the amount of money is, in most instances, cartoonishly small. A pittance compared to the billions of dollars about a dozen banks and their affiliates likely saved by getting this sweet settlement deal.

For example, there’s the category of homeowners who were foreclosed on—that is, successfully kicked out of their homes—even though the borrowers had worked out a new payment plan with their bank to stay in their home and stuck to it. There are 234,000 of them.

Another 865,000 were in the process of foreclosure, even though they’d worked out a new payment plan.

That, by the way, is euphemistically known as “dual tracking”, where a bank is processing your loan modification but is simultaneously pursuing foreclosure against you. A better term would simply be call it double dealing or double crossing.

Which brings us to our next notable category: Cases in which the “servicer initiated or completed foreclosure on a borrower who was not in default.”

If the foreclosure was completed on a homeowner who was not in default, that homeowner gets $125,000.

$125,000 dollars for taking your home away from you without justification. These homeowners are people who did nothing wrong. They were not in default, and their homes were taken. We would say they were stolen in any other context.

The outrage of that category matched perhaps only by this one: “Servicer foreclosed on borrower eligible for Servicemembers Civil Relief Act”. Translation: Banks wrongfully foreclosing on active-duty members of the armed forces.

It’s a criminal felony, but the banks merely pay out $125,000 dollars to those victims. All the other awards in all the other categories pay out mostly nominal amounts.

Many of the three and a half million homeowners who will receive some kind of payment were supposed to get an independent review from the government. But the Federal Reserve and the Office of the Comptroller of the Currency (OCC) punted.

They punted because the independent review process was “deeply flawed” as the New York Times characterized it. Instead, the OCC engineered a mass settlement.

What it represents is, in any intuitive sense, the evidence of a crime wave that once again the banks will not have to answer for.

Our home of 20 years was NOT in Default. Borrower (husband) asked JPMC/WaMu for a DUE DATE CHANGE (2009) …NOT a rate or payment/principle reduction…A DUE DATE CHANGE. JPMC instructed borrower to not make payments for 3 months…instead of the DUE DATE CHANGE….3 months and 1 day later the Sheriff was at the door with Foreclosure Summons. To stop the Sheriff Sale with a Stay, borrower filed BK with intentions of suing JPMC, however before BK was discharged borrower had massive heart attack and died (Thanksgiving Day 2010). Between JPMC and Freddie Mac our home was allowed to be STOLEN. I, the spouse was not allowed to defend my rights to my home of 20 years. The amount received from the IFR/OCC…..$500….and they made the check out to a dead person! (IFR had borrower’s death certificate for a year prior to issuing the check)